Uber is one of those companies that’s down to lose a buttload of money in pursuit of a monopoly over its industry. If it doesn’t achieve that, it’s going to go down in flames. The evil ridesharing empire lost $3 billion last year, and $4 billion the year before that, and it was so excited about losing one less billion dollars than it usually does that it decided now was a great time to go public. In a prospectus filed with the SEC prior to its IPO, Uber explained that its entire strategy was to dominate the transportation ecosystem, from taxi services to buses meal delivery to trucking to those e-scooter things that everyone hates, and outlast its competitors by hoping everyone else runs out of money before they do. As the company put it in its prospectus, the moment their competitors “shift their strategy towards shorter-term profitability,” Uber wins. How is “be willing to lose more money than the other guy, for longer” a viable business strategy, and why would anyone pay any amount of money to invest in it?
The answer to those questions don’t really matter, because money isn’t real and also Uber apparently has a shitload of it. And when it is the only game in town, it’s going to ratchet up its prices and wring every bit of money out of the drivers who make up its workforce. Uber drivers know this, and they’re pissed: Earlier this week, drivers around the world engaged in a 24-hour strike to protest Uber’s IPO, as well as the fact that the company classifies them as “independent contractors” rather than actual employees. The company is also dealing with a class-action lawsuit brought by drivers who are fighting their independent contractor status, which it’s currently attempting to settle while it’s still in the “lose all our money on purpose” phase of its business. While the company claimed in a May 9 SEC filing that it believes “drivers are independent contractors,” Uber clearly doesn’t believe that too hard, because the filing goes on to reveal that Uber has $132 million squirreled away to pay to 60,000 drivers who are suing to be considered employees. Uber also notes that it has already given $20 million to its drivers to settle a similar lawsuit and expects the amount of settlement money it will shell out this year “will fall within an approximate range of $146 million to $170 million.” Uber is by no means the only tech company with a “We do bad things” fund: Facebook recently revealed that it anticipates paying $3 to $5 billion in fines to the FTC, and its chief competitor Lyft noted in a prospectus of its own that it is “currently involved in a number of [lawsuits]” from drivers similarly challenging their contractor status.
This morning, Uber capped off its extremely exciting week by embarking upon its first day as a publicly traded company. One of the most-anticipated Initial Public Offerings in finance, the ridesharing service debuted on the New York Stock Exchange with a stock price of $45 per share, and then immediately saw its price plummet. This is basically the opposite of what Uber’s board hoped would happen. Such a first-day downward price movement indicates that the company, which has yet to turn a profit in its ten years of existence, has been overvaluing itself to investors, and is now going to have to pay for it.
There are a few reasons why Uber’s shares failed to rise. Perhaps the most obvious reason is that today wasn’t great for the stock market as a whole, and such downward pressure is a lot for any company to overcome. Then, there’s the case of the company’s chief competitor, Lyft, which went public in March and has spent the past few weeks falling from its $72 first-day price down to $52, perhaps chilling the enthusiasms of potential investors. But even if the stock market had been doing great today and Lyft’s IPO hadn’t been a low-level disaster, Uber would still kind of suck.